LIRP: tax-free retirement income from a life-insurance chassis.

A max-funded permanent life-insurance contract, designed and tracked specifically as a retirement-income source. During accumulation, premium funds the policy aggressively up to the §7702A MEC ceiling. In retirement, income is drawn via policy loans against cash value under IRC §72.

The headline benefit is that the loan income is not treated as taxable income for federal purposes while the policy stays in force. The legacy benefit is the income-tax-free death benefit under IRC §101(a). The accumulation profile is indexed crediting with a cap and a contractual floor.

Sequence: 401(k) up to match, then Roth IRA if eligible, then Roth 401(k) up to limit, then mega backdoor Roth if available, then LIRP. If the household is HNWI enough that the first four are maxed and they want additional tax-advantaged retirement capacity, LIRP makes sense.

Where LIRP shines specifically: as a tax-diversification bucket in retirement years, drawn down in years when the pre-tax bucket would push the household into a higher bracket. The optionality is the value.

• Tax-diversification: a third bucket alongside pre-tax and Roth, drawn from selectively.
• Sequence-of-returns hedge: a contractual floor that taxable brokerage doesn't have.
• Permanent legacy: an income-tax-free death benefit if you don't end up needing all the cash value.

Policy lapse with a loan outstanding triggers taxable income on the loan balance over basis. This is the LIRP failure mode that critics get right. We design every LIRP with margin against lapse: conservative crediting assumptions, an exit checkpoint, and an explicit minimum-funding schedule.

Carrier risk matters: the income-tax-free outcome depends on the carrier honoring the contract for decades. A-rated or stronger carriers, with durable cap histories, are not optional.